The housing and related sectors are one of the main engines of any economy, which currently contributes 5-6 per cent to the GDP growth.
There are a number of associated beneficiaries of the housing sector, right from cement, steel, furniture, furnishings etc. The sector is also a great employment generator, employing almost around 10 million people.
A report by National Real Estate Development Council (NAREDCO) says that if the sector grows by 25 per cent, employment in the sector could be doubled.
The biggest advantage of this sector is that it not only provides employment to the skilled labor but a lot of unskilled labor finds employment in the sector.
The last budget came out with some sops for the sector, which provided impetus to the low cost housing sector.
External Commercial Borrowings have been allowed for projects with low cost housing, provisions under Rural Housing Fund were enhanced from Rs 3,000 crore to Rs 4,000 crore (Rs 30 billion to Rs 40 billion), an interest subvention of 1 per cent on housing loan up to 15 lakh in cases where the cost of the housing unit did not increase 25 lakh.
Whereas these measures provided a boost to the sector, there was an increase in service tax from 10 per cent to 12 per cent coupled with increase in excise duty rates for materials and equipment used in the sector. This led to pushing up of the prices in an already tight market.
This year too the sector is replete with expectations from the budget. All important agencies that represent the sector like NAREDCO and CREDAI have submitted their memorandums to the Ministry of Housing and Poverty Alleviation for inclusion into the Budget 2013.
One of the important expectations from the budget is grant of infrastructure and industry status to the sector so that better financing options are available, and group housing and township projects are benefited.
Also this move will act as a boost to the rural and affordable housing sector. The real estate sector also looks forward for to passing of a Regulatory Bill for the sector.
Due to lack of any regulations in the sector, customers are often at the mercy of the developers for timely and efficient execution of housing projects.
The regulatory bill is proposed to act as a one-window clearance for all projects and will bring transparency into the sector.
The other expectation from the budget is the widening of tax benefits to individuals availing home loans. The current provision allows a deduction of up to Rs 150,000 towards payment of interest and payment of principal is covered under Section 80C.
NAREDCO has sought to extend these limits, as the existing limits were fixed way back in 2001. Taking into account the indexed cost of the exemption the Council has suggested increasing the limit to Rs 300,000.
Further, benefit under Section 80C of Rs 100,000 is inclusive of all exemptions like insurance, PPF, ELSS, etc and the principal repayment.
An individual uses up most of the exemption on other tax saving options and hardly any scope for including principal repayment.
Therefore, the Council seeks to enhance this limit to Rs 200,000, out of which Rs 100,000 be reserved exclusively for repayment of principal. All this would ensure more number of home loan applicants and would boost the sector.
Capital Gains rules states that proceeds arising from sale of a house needs to be invested in buying a house to avail capital tax exemption. It is proposed that the provision may be extended even when the proceeds are invested in buying more than one house.
It is evident that there is lack of houses in our country and ownership of house is extremely difficult in this economic scenario. Hence renting is a viable option. To boost the rental market, it is suggested that rental income be taxed at a flat rate of 10 per cent.
NAREDCO recommends that there should be an increase in deduction on rental income under Section 24(a) from 30 per cent to 50 per cent. It also suggests that for women there should be a deduction of 100 per cent, to better empower women.
The real estate sector being a great mover for economy and employment deserves certain exemptions and tax sops. As bringing in growth is on the agenda of our Finance Minister, the housing sector should see some boost coming in this budget.
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